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Airport hubs and their evolution

US hub airports are often host to extraordinary dominance wielded by a single carrier or alliance. In some cases, this concentration far exceeds anything seen in other geographies, even where “national” carriers exist. The US is also the only developed aviation market with a multiple hub system. Most other countries have have one primary international entry point at which the dominant carrier focuses its operations. The only exception is Germany, where Lufthansa operates dual hubs at Frankfurt and Munich. In Spain, Iberia is solely focused on Madrid, having long ago discontinued its transatlantic non-stops from Barcelona. Those that remain are now operated by Continental, Delta and American via their New York hubs.

Long before its bankruptcy, Swissair abandoned Geneva as a secondary hub, despite the city’s substantial high revenue traffic generated by the large number of NGOs headquartered there. And SAS has struggled continuously with its need to balance other carriers' nonstop services with the unsustainable multiple hub model over three countries.

Even Japan, that has made substantial investments in trying to create airports that provide alternatives to Tokyo, has seen relatively little airline interest in operations to those cities—even from its own carriers. Most other Asian countries are similar in hosting a single hub; exceptions are found only in those countries with a large land mass, or other geography that necessitate direct services.

But multiple hubs continue to thrive in the US; partly because it is a highly developed market with a large population that flies, and partly because the multiple carrier model drives airlines to seek their own turf.

Yet, although the model continues to thrive in the US, developments over the past decade have significantly reined-in the desire of carriers to plant additional hubs, rather the trend has been one of retrenchment to those airports that have served as traditional fortresses.

Looking at Delta alone, the carrier established and deconstructed a powerful hub at Cincinnati and for a while attempted to establish a major North Asian hub in Portland, Oregon. American tried unsuccessfully to establish San Jose as an alternative to SFO, and Columbus, Ohio hosted the supernova that was Skybus.

In coming reports, we will look at how these developments came to pass and the ways in which communities have been affected by the various experiments which were undertaken at the behest of airlines that then walked away.

Main hubs pre-September 11

At the height of the competitive cycle in the 1990s, not only were traditional hubs being strengthened, but additional, supplementary hubs were established. This was done by some carriers to relieve pressure on overloaded airports and by all to up the ante in the “look at all the choices we offer” game that was being played. In most cases the cities and airport authorities were eager participants in the endeavor.

In early 2000 the roughly 853,000 residents of Dayton, Ohio, had 69 daily non-stops to various carrier hubs. This figure does not include service to New York which could also, especially in the case of Continental, be considered a hub destination.

In contrast, Nice, France, with a similar but slightly larger population, had roughly 55 daily services to carrier hubs—18 of them to Paris alone—with foreign carriers providing only 37, a third flown by Swissair. In 2000, European carriers were also engaged in a pitched battle to secure connecting traffic. Reflecting the single hub European structure, only Swissair and Lufthansa had service to more than one connecting city. The other difference vis-à-vis the US is that, except for Air France, all the carriers vying for traffic were based in other countries.

While both cities no doubt had overcapacity, the US carriers definitely won the profligacy race.

All of this began to unravel on September 12, 2001, when carriers that had previously exulted in excess began to rapidly unravel those networks and rethink the wisdom, and sustainability, of their previous models.

The changed pattern in 2010

A decade on, just how have the patterns changed and what new market alignments have developed?

In Dayton, there are the same number of carriers luring Daytonians to their hubs, but the list of carriers and hubs has changed considerably. Gone are TWA and Northwest—one defunct and one merged. As a result St. Louis has dropped off the list. The only way to fly between the two cities now is with a connection. Also gone is Cincinnati, in 2000 the city with the most hub connections. It also no longer has any direct service to Dayton.

Similarly, US Airways has a decidedly lower profile than in 2000, with Pittsburgh gone entirely (again eliminating all service between the two cities) and dropping the carrier’s total flights from 22 to 13.

Continental has buffed up and now provides almost all the service to the New York area. The metro area that has seen the most growth is Baltimore/Washington, with all three of its airports now having nonstop service.

Non-stop services: Dayton: 2010

DAY to

DL

FL

CO

UA

AA

F9

US

ATL

8

3

DTW

5

MSP

2

CLE

4

HOU

2

EWR

4

ORD

6

BWI

4

MKE

2

DEN

1

2

IAD

4

DFW

3

CLT

5

DCA

4

PHL

4

Source: OAG, Feb 2010

Access to the west has been increased by nonstop service to Denver—on both United and Frontier. American’s presence has been altered as it dropped all Chicago flights but has added another to Dallas. Overall, the total number of hub-access daily flights has dropped from 69 to 63. Also now present are two new generation carriers, AirTran and Frontier.

Meanwhile, across the Atlantic, things have changed much more in Nice. easyJet is firmly in place and has eliminated Swiss services to Geneva and Basel. And while BA remains a player, U2 has the largest offer from the UK as well. Air France would seem to have increased its influence and likely draws more of the long-haul connecting traffic over Paris than was the case in 2000. Delta now operates a daily nonstop to New York, as opposed to 4 weekly flights in 2000, in codeshare with Air France which has doubtless attracted more of the US-bound traffic that previously connected elsewhere.

The foreign legacy service has dropped from 37 to 29 (down 22%) weekly flights and point-to-point LCCs have captured much of the local traffic. Meanwhile Air France, despite a significant challenge by easyJet at both CDG and ORY, shows a 25% increase in flights.

Two caveats:

There are, of course, other non-stops, but with less than daily service they cannot be considered as viable competitors for connecting service. Turkish, for instance, operates 5 weekly service to Istanbul but with two different departure times.

The ever-present Emirates operates a daily A330 to Dubai, doubtless siphoning traffic that is bound for points in the mid-east and Asia.

Across the globe, the hub-and-spoke system remains alive and well. Especially in the US, carriers continue to fiercely battle for online passengers across their systems--or, in a broader sense, their alliances.

But as new entrants emerge and continue to make inroads, they alter the balance of power that was still alive and well just a decade ago. And the push to have ever more hubs on offer has been abandoned—along with some of those cities. The model will continue to evolve and consumers will have new choices as legacy consolidation marches on and new players bring different alternatives. But even more hubs? Maybe not so much, at least not in Europe and North America. That luxury will be reserved for the high growth markets of Asia and the Middle East.

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